Starting point for American crisis: shift from local economy to national

If the tractor doesn’t fit in with your system of farming, try changing your system of farming.

– Wheeler McMillan, Power Farming, 1921

For most purposes, a man with a machine is better than a man without a machine.

— Henry Ford, 1926

The tractor industrialized the farm and the successful marker needed the same skills as a successful industrial manager . . . he was a businessman who grew commodities such as food and fiber.

– Robert C. Williams, Fordson, Farmall, & Poppin’ Johnny, 1987.

A farm is not a place to grow rich. A farm is a place to grow corn.

– Andrew Lytle

We resist believing it, but whatever predicament we end in, we arrived there by choice. The Industrial – and social – Revolution of the 19th and 20th centuries worked huge changes on the US economy and society, shifting economic activity and people from country to city. Four of those changes were monumental mistakes.

At the time, these changes seemed good & appropriate, and most appeared profitable, but without appreciating all that was given up and all that was taken on. Generally, all were changes that moved the focus from real to abstract, imposing an ideology (even if only the ideology of “Progress”) on reality. And if reality didn’t fit the ideological bed, well, like Procrustes the managers just lopped off toes and feet and heads.

All these changes seemed more productive, but were not in fact when all the costs were counted. Of course, some costs wouldn’t show up for decades, or even generations, but they all changed the character of the Republic and its people. Some even threaten human survival, never mind prosperity.

Money vs. wealth

Although the words are often used interchangeably, money and wealth are not the same. Money is the abstract, the derivative of wealth, but not wealth itself (at least not anymore, when no money has substance).

From the most ancient times, people measured prosperity not by money but by wealth: productive assets. Orchards, sheep, goats, cattle, slaves, land, seed, vineyards, boats, wag- ons, mills, mines – all these are capable of producing something useful. They are fertile. Mere money is sterile, until it is put to work.

Money – coined money – was invented in Lydia in Asia Minor at the end of the eighth century B.C. Before that, every transaction was barter, and even transactions with silver or gold involved weighing out tiny ingots of varying fineness and weight.

The Greeks didn’t invent coined money, but they quickly developed it, adding the stamp of the state to guarantee weight and fineness. Dazzling opportunities for trade emerged. The rage for money grew in Greece, transforming a wealth economy into a money economy and pushing economic development past society’s ability to digest it. Within a scant 100 years, the money economy was about to destroy Greece, enslaving her citizens and transferring and concentrating their wealth into the hands of a few. A lively usury industry sprang up, and farmers, the backbone and majority of the commonwealth, rapidly fell into debt. Besides mortgages, they also made “chattel mortgages,” pledging themselves, their wives, or children as collateral. When they couldn’t repay, they lost not only their lands, but their liberty, wives and children. The creditors foreclosed and sold them into slavery. Athens fell into an economic crisis that threatened to enslave most of the agricultural population.

In 594 B.C. the Athenians elected Solon archon on an ambiguous platform short on specifics, but long on hope for creditors and debtors alike. He surprised the moneyed interests, as well as every on else, by assuming extra-legal powers and “issued a revolutionary decree: the ‘shaking off of burdens’ (seisachtheia).”1 It cancelled all agricultural and personal loans, freed en- slaved debtors, and forbade pledging borrowers or their family as collateral. He also debased the currency 27%, and made all debts payable in the cheaper coin. Athens was saved, but the banks were badly tattered.

Wealth passes to the creditors

Why bother with a tale of ancient Greece? Because it illustrates the plight of all societies in the face of money. If they cannot control its use, it destroys them. This holds especially true for debt and usury. Left unrestrained by law and custom, in a few decades usury will pass control of all wealth to creditors. With that wealth, they gain control of the nation as well. Harmony, peace, prosperity, and civil order disappear.

Obviously, when a nation’s focus shifts from wealth to money, national character also changes. Necessarily, a man whose mind is set on wealth must also be set on production. Unless he serves himself and his neighbor by efficiently producing something useful, he will never accumulate wealth. Necessarily, his selfishness is channeled, will-he, nill-he, into serving his neighbors.

More, in that production he will take care not to foul his own nest. If his wealth is alive – animal or vegetable – he knows that his wealth depends on its health. To build more wealth, he must take a holistic, long term view, decades or longer, considering all the possible consequences of his work on his wealth and his continued ability to use it.

The proverb, “You get what you pay for” also applies. In a wealth economy, you pay for production. In a money economy, you pay for – money.

Shifting to a money economy makes every man’s goal to get money. Get it nice or not so nice, but get money. At day’s end, the only thing that counts is that money number on the bottom line.

Since money is an abstract, it is attracted to abstracts. Certainly you can get money by production, but the far faster way is to traffic in money itself, lending, handling, & investing. Stock markets and corporations entered, separating money-getting from neighbors, neighborhoods, people, production, and most of all, personal liability and responsibility. It became possible to invest in production without knowing – or caring – about the long-term costs and consequences. The morality of business was reduced to, What is the number at the bottom line? Environmental and social costs in California or Michigan couldn’t really matter to an investor in New York or Florida, unless they hit that bottom line.

We pile up money, neglect wealth

The results of this mindset on the American character are too obvious to need comment. Americans’ goal became piling up money rather than wealth, as expressed by the bumper sticker, “He who dies with the most toys wins.” Everybody became an investor but most became speculators, aiming at joining the retired rentier class as soon as possible. The phrase “former day trader” eloquently sums up the speculator’s end.

As minds looked from wealth to money, they began to borrow more. Between roughly 1950 and today the way Americans financed their business activities was revolutionized: equity financing (financing out of your own pocket and profits) was replaced by debt financing. After all, borrowing money meant that you could leverage (“pyramid”) your activity and get even more money. Unless, of course, you couldn’t make a payment.

By now the change is nearly complete. Less than 1% of the population works producing food, and not many producing much else. American industry has been dismantled and shipped overseas, where labor costs a tenth as much. That’s rough on neighbours, neighbourhoods, people, and production, but works wonders for the bottom line. Now we are told we have left behind the outmoded production economy and progressed to the purely abstract service economy.

Precisely how well that works, you can see all around you.

The great joke here is that the very “money” that the money economy seeks no longer has any value itself. The abstract of wealth in America has become purely an abstract itself, a social construct, or better, a central bank creation. It is a derivative of confidence alone.

Household economy to industrial economy

For the first six thousand years or so of humanity’s existence, all economic activity centered on the household. Most economic activity took place in the household, not the factory or corporation.
For all its limitations, the household economy brings capital and labor side by side. Because of the closeness of its members, it must be ruled by love (the Biblical fulfilment of the law, the Golden Rule) rather than greed. The owner-worker relation is not solely economic, so is not ruled by getting the most work for the lowest wage. A household economy locates capital in households, dispersed widely through the economy rather than concentrating it. That means the greatest possible number of people have their own stake in the economy’s success.

In a household economy, children are useful, adding to the family’s output rather than hanging on as 18-year unproductive drains. You quickly see that today among the Amish. Every child has some work all his own. They even teach 2-year olds to fill the wood box.

Household economy — & its limits

Of course a strictly household economy has limitations: lower production, little standardization, insufficient capital to undertake large projects. The deleterious shift I am describing is more dramatically shown when enterprises change from family to corporate ownership. By now very few family-owned firms are left. One I know was sold a few years ago, and the new corporate owners came in, fired about a fourth of the staff, and raised production quotas to ridiculous levels. Sure, the family owners had probably tolerated a bigger staff than was needed, but those people were part of their family.

Changing from household to industrial model necessarily changes relationship between owner & worker. Legally, the “servant-master” relationship has become “employer-employee”: the use-er and the use-ee. Greed and the bottom line, not mercy or love, rule this relation.

We’ll look in Part II of this post at the disaster of industrial farming and how it changed human relationships and helped convert local economies into extensions of the national one.

From the May 2009 Moneychanger newsletter. Used by permission. Franklin Sanders is publisher of The Moneychanger, a privately circulated monthly newsletter that focuses on gold and silver and the application of Christianity to economics, culture and family life. We have subscribed to this newsletter for more than 20 years, and consider it a must read. F$99 a year. Franklin is an active trader in gold and silver (he’ll swap your green Federal Reserve rectangles and give you real money in return). He trades with savers and investors outside Tennessee. Subscribe to his daily price report and market commentary on the website. F. Sanders, The Moneychanger, P.O. Box 178, Westpoint, Tenn. 38486 Tel. 888-218-9226.

About The Author

Franklin Sanders is publisher of The Moneychanger, a privately circulated monthly newsletter that focus on gold and silver and the application of Christianity to economics, culture and family life. We have subscribed to this newsletter for more than 20 years, and consider it a must read. Franklin is an active trader in gold and silver (he’ll swap your green Federal Reserve rectangles and give you real money in return). He trades with savers and investors outside Tennessee. Subscribe to his daily price report and market commentary on the website.